Despite recent instability in the crypto sector, Ethereum and Bitcoin still continue to be the top players in the industry, having the largest market cap. The two digital assets are unique in their own ways, with some similarities and key differences between them. If we compare the two cryptocurrencies’ performance, Bitcoin may seem like a better investment right now, especially due to its large market capitalization. However, past performance isn’t an indicator of future evolution, according to Binance, so that wouldn’t be an accurate way to choose between the two assets. Besides, BTC may have maintained its position in the market since its inception, but Ethereum has managed to achieve a market cap just as significant as Bitcoin. As a result, many crypto investors have done their research about Ethereum, and strongly believe in the digital asset’s future potential.
There’s been a long debate on whether Ethereum will surpass Bitcoin in the next few years, and although everyone would want a certain answer to this question, the reality is that things are uncertain, and the outcome depends on many factors. Let’s take a look at the two cryptocurrencies to understand their features and figure out which of them is a better buy in the long run.
Basic info about Bitcoin and Ethereum
Bitcoin is the first cryptocurrency introduced in 2009 by Satoshi Nakamoto – a developer whose identity remained a mystery throughout all these years. It was designed as a secure digital payment that works without the help of a bank and has paved the way for the creation of many other appealing cryptocurrencies. Bitcoin has been adopted as a form of payment while also becoming a popular investment included even in some retirement plans.
Ethereum was introduced in 2015 by developer Vitalik Buterin as a way to expand on the promise of crypto to decentralize a large part of the economy. Unlike Bitcoin, Ethereum also provides a platform that enables developers to write programs, thus offering unique services. For instance, Ethereum supports different trading protocols, but also games and various other types of blockchain-based projects.
Factors that impact Ethereum and Bitcoin’s potential
Institutional Money Flow
The flow of institutional money into cryptocurrency is an essential factor to consider when deciding which asset will be a worthwhile investment in the long run. As for now, Bitcoin has a significant edge over Ethereum, with many institutional investors considering it a safe haven asset which can help them withstand the broader market’s volatility. This scenario already occurred earlier this year when the regional US banking crisis resulted in a new money flow into Bitcoin. Unsurprisingly, this led to quick price gains. Furthermore, during the whole summer, the launch of the first Bitcoin EFT was a topic that dominated the crypto market, resulting in a mini-rally in Bitcoin’s price during the middle of June. Given these aspects, it is likely that more institutional money will flow into Bitcoin rather than Ethereum. From this perspective, it’s unlikely for Ethereum to surpass Bitcoin.
Adoption Rates
This is one of the most important aspects to consider when comparing the two projects. As the two digital assets keep going mainstream, there is expected to be a significant surge in their user bases. As far as Ethereum is concerned, its robust ecosystem could enhance its adoption rates – which could possibly help it overtake Bitcoin.
Ethereum has broad use cases, including NFTs, smart contracts and DeFi. The latter holds great promise due to blockchain’s unique characteristics, such as immutability and transparency, helping democratize access to financial services, and giving decision-making power to communities instead of centralized entities. DeFi has a complex ecosystem, and fragmentation is one of the most significant issues to overcome to drive mass adoption. However, this can be solved by promoting interoperability between use cases and blockchains. Simplifying the user experience by rethinking UX models can lower barriers to entry considerably, driving broader adoption of DeFi and, thus, of Ethereum.
Tech Improvements
When it comes to tech improvements, Ethereum has an established edge. While Bitcoin is based on a PoW consensus mechanism that requires energy-intensive mining, Ethereum uses a PoS technology that completely eliminates mining, making it more energy-efficient and, thus, more appealing to eco-conscious investors – ultimately, this plays a considerable role in driving further adoption of the cryptocurrency.
However, the Merge was only the first step in Ethereum’s path towards a more solid ecosystem which users can trust. As Vitalik Buterin mentioned, Ethereum will be subjected to further tech improvements, which power the development of an incredibly efficient “Ethereum 2.0”. When all the upgrades will be completed, Ethereum will become one of the most reliable and secure transaction networks to exist. This will likely play a role in making it more appealing to users and investors.
Market Sentiment
This is another critical factor when it comes to flipping, as market sentiment plays a role in driving the supply and demand of a specific asset determining price movements in the market. Like any other crypto, the market sentiment for Ethereum and Bitcoin can vary depending on several factors, such as regulatory environment, market trends, forums and social media, investor behavior, and use cases of the asset. For instance, if a top institutional player makes an Ethereum investment, this can enhance confidence, thus resulting in a positive market sentiment for the digital asset – and the same is true for Bitcoin.
If enough investors consider Ethereum a more profitable investment than Bitcoin, there’s a good chance that the long-awaited flipping will finally become a reality. If Ethereum further develops its use cases, it will likely result in a more favorable market sentiment. Moreover, the projects built on the Ethereum blockchain – and how lucrative they are – can also play a role in this.
Final words
It’s been years since crypto investors have been waiting for the moment when Ethereum will finally flip Bitcoin, becoming the most valuable crypto. But this can only happen if Ethereum’s growth outpaces Bitcoin by a considerable margin. Given the aspects discussed above, this scenario isn’t unlikely to occur at some point, but right now, things remain unclear. However, no one can deny that Ethereum has great features, making exposure to its technology a valuable addition to your investment portfolio.